Richard Murphy Managing Director - TEC. Buying Energy in a Complex Market

Transcription

1 Richard Murphy Managing Director - TEC Buying Energy in a Complex Market

2 Today s discussions. Compliance What is and what isn t? Who to trust. Public sector under attack. How to compare - Transparency. What approach to take. What to expect Prices going one way but why? Quantifying the benefit. What would you do?

3 Compliant Procurement. Option 1 Procure Your Own Contract Direct With Supplier. Example 1 & Example 2 Option 2 Procure Your Intermediary. Example 1 & Example 2 Option 3 Use a Framework. TEC Framework (Example 1) & Example 2 Should we have to make FoI requests all the time to find out just what is complaint and what isn t?

4 Flag of convenience Questions to ask. When is a framework not a framework? Is this a Flag of Convenience Agent for a random Public Body Who is the Contracting Authority here? What if the Contracting Authority is a Private Limited Company? TED Notice Example and Private Company, On Behalf of AND a Framework. How was the agent selected and should they have been selected via a transparent and compliant process? Is the activity of national purchasing covered in the constitution of the Contracting Authority? Are they acting beyond their scope?

5 Who to Trust? It s a murky business. Brokers and Consultants (TPIs) will say their fees will always be Below Threshold. If so, why do suppliers pay them so much? There is no obligation for disclosure of fees/commissions on energy contracts set up by TPIs. Responses to Cornwall Energy survey of businesses using energy TPIs showed that 32% thought the service was free while another 47% did not know what they were paying for the services delivered. Some steps taken towards a Code of Practise. As long as there is no obligation to disclose hidden fees, the debate on whether services should be procured via a compliant route will continue. The Public Sector has been restricted, but they are looking at all opportunities to make money through questionable practise. It is taking money out of the Public Sector which could be spent on essential services.

6 Who are these TPIs and how much money do they charge? Larger Businesses Inenco, Utilitywise, Schneider, Accenture/Energyquote. Up and Coming Inprova, Inspired Energy, Kinect Energy, The Energy Brokers. Looks big, but really quite small Trident, TECC (??), Apollo, Pulse. And at least 500 others. In a non-regulated, high fee market, it is easy money. XXX is remunerated through the suppliers via 'contract placement fees'. At no stage will you be billed for XXX s procurement services, similarly at no stage is there a contract between XXX and our clients, all contracts remain with the chosen supplier(s). Based on data provided by Framework suppliers, TEC Members would have paid a total of 3.8 million more using a TPI than they did TEC in the year 15/16.

7 So you have chosen who and how, now when.

8 Wholesale Energy Prices Daily Volatility

9 Pence per Therm per MW Pence per Therm per MW Wholesale Energy Prices Falling Year on Year Gas Price - Winter Power Price - Winter 9000% 8000% 7000% 6000% 5000% 4000% 3000% 2000% 1000% 0% 7000% Winter 13 Winter 14 Winter 15 Winter 16 Winter 17 Season Gas Price - Summer Winter 13 Winter 14 Winter 15 Winter 16 Winter 17 Season Power Price - Summer 6000% % 4000% 3000% 2000% % % Summer 14 Summer 15 Summer 16 Summer 17 Summer 18 Season 0.00 Summer 14 Summer 15 Summer 16 Summer 17 Summer 18 Season

10 But prices are going the other way why? The cost of de-carbonising UK electricity generation is being paid for by the customer. The Government says it will act to cap prices, when it is their policy and the resulting charges which are driving prices upwards. The Commodity Global prices are falling (Oil glut, gas glut, movement away from Coal). Distributors say that connecting lots of smaller generators will require different distribution networks. And then they change the way the sectors of the industry are run and the regulators agree that this will cost money. Domestic users are not exempt. Report forecasts bills to rise by 660 per year by 2022

11 But are you just buying energy?

12 The Longer Term Mostly Bad News CM FiT CfD RO FiT CCL Distribution system charges Transmission system charges (triad) Losses HDC BSUoS Imbalance Supplier margin 0.00 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Commodity

13 Just one example of these changes.

14 Measure the benefit. How do you assess the performance of one contract/intermediary against another? UKUPC Protocols don t really work for Energy. Nobody Beats the Market, and if they do they have to be 3.8 million better. There are no hidden markets, so it is a matter of choosing how much you fix, and when. And then how much Risk you want to take. There are elements of the benefit which you can quantify and receive as long as you continue with the provider. With increasing uncertainty about all areas of the bill, it is a case of avoiding premiums charged to cover for these. Being able to budget effectively is half the challenge. Aggregated frameworks should (and do) achieve better supplier margins, so measure this too.

15 Once you have bought how do you report the benefit?

16 In Summary, What would You Do?. It is complex, but it needn t be costly. Public Sector Energy is being targeted by unscrupulous intermediaries. Can CPB s be experts in everything, including energy TEC Can and won an award against Private Sector Competition. But then can specialist energy brokers be experts in procurement? Compliance is there to drive transparency, but what do you do when the private sector approach is anything but? And once you have decided, are you just having the same news in a different wrapping? If in doubt, forcing transparency can often frighten off the bad guys. There is always help at hand, even if the facts and reality is not what your organisation may want to hear. Questions?